The DJIA is currently approaching the psychologically important 12,000 mark on the downside:

My warning for a stock market crash last fall based upon astroharmonics and seasonality was premature. In response to Federal Reserve efforts to rescue the stock market and economy from collapse starting last August with a cut in the discount rate, stock prices rebounded with the DJIA reaching a new all-time high above 14,000 in early-October of 2007. Now, however, it appears that federal authorities may be out of ammunition in combatting the onset of collective depression and a secular bear market has begun.

According to the Elliott Wave Principle, this may be a Grand Supercycle or even Millenium Cycle collapse now underway. My current wave count indicates that a reversal below Dow 12,000 in the near-future may be the beginning of a historic crash that could outline the collapse of Western Civilization.

- DOW THEORY BEAR MARKET SIGNAL -

Before getting into Elliott Wave specifics, let's first examine stock market patterns in the context of Dow Theory.

Unlike the first top at Dow 14,000 in July of 2007, the peak in the Dow Industrials last October was not confirmed by the Dow Transports and Utilities, something you'd expect to see at the final top according to Dow Theory. As can be seen below, the Utilities peaked late last year and the Transports had peaked last July:

On November 21st of last year, a Dow Theory primary bear market signal occurred when both the Dow Industrials and Dow Transports closed below the prior August 16th lows in the indices. The Transports broke below the August 16th low of 4672.35 and the Industrials closed below its August 16th low of 12845.78. The record of the Dow Theory is impressive. According to one statistical analysis, if you had bought and sold stocks based upon Dow Theory buy and sell signals from 1897 to the year 2000, you who have achieved a return ten times that of simply buying and holding during the same period.

One should note that on June 6th, the Dow Transports reached a new closing all-time high unconfirmed by the Industrials and Utilities and then turned sharply lower. This is a Dow Theory non-confirmation that buttresses the case that a secular bear market is underway.

The scale of the bear market that might have been signalled by the Dow Theory sell signal in late-November of last year is suggested by the Elliott Wave Principle popularized by Robert Prechter and Elliott Wave International over the past three decades. If you are unfamiliar with the Wave Principle, there are excellent online tutorials to help you better understand it.

According to the Wave Principle, the cyclical top reached in stock prices in October 2007 could have been a Grand Supercycle peak some 200 years in the making. In fact, there is even reason to believe the top reached was the peak of a Millenium Cycle, i.e., it signified the peak of Western Civilization. To better understand why this is so, please watch the following presentation I gave on Cambridge Community Television in 2000 and keep in mind that the peak ended up occurring in the Fall of 2007 instead of the Spring of 2000 as I had believed at the time (although the speculative peak as measured by the Nasdaq Composite did occur in the Spring of 2000):

If indeed a Grand Supercycle turning point in world history recently occurred, then the largest bear market in human history is now unfolding. If so, this implies the crash of Western Civilization has begun. In this light, it is important to note that there is an imminent danger, with a reversal from Dow 12,000, a Grand Supercycle-scale crash will occur. This is made clear by the fact that a drop below Dow 12,000 entails breaking below the lower trendline for the bull market in stocks underway since the '87 Crash:

Also, please note that the lower trendline from the 1982 low was recently violated signifying the beginning of the Grand Supercycle bear market:

As for the "Grand Supercycle Crash", the recent Elliott Wave patterns suggest this may be imminent.

According to the Elliott Wave Principle, the "third wave" down is the extended crash wave.

As can be seen above, the DJIA peaked above the psychologically important 14,000 mark in October, reached an intermediate wave-(1) low in March with the collapse of Bear Stearns and then a wave-(2) rebound to the 13,000 mark occurred into May.

If this Elliott Wave count is correct, then, with a reversal below Dow 12,000, the crux of an intermediate wave-(3) down should occur. If, indeed, the top reached last October was the Grand Supercycle peak, then this means the next leg down in stock prices could be a Grand Supercycle-scale crash.

Update: According to my current Elliott Wave count we have started wave-iii of wave-1 of wave-(3) down. This indicates a sharp sell-off has started. While this might mean a full-scale crash in the immediate future, the greatest potential for a full-scale mass panic will occur with wave-iii of wave-3 of wave-(3) which should occur around the late-summer or fall:

Historically, when the major stock averages, and the DJIA in particularly, reach or trade around psychologically important round numbers like thousand marks, the stock market may top-out and, failing to hold near or above the mark, sharply reverse course. A remarkable feature of these stock market reversals at thousand marks in the DJIA is that they are often associated with negative news that follows the market top.

For instance, on September 6th of 2001, the DJIA fell decisively below the 10,000 mark , THEN September 11th occurred driving the market down sharply.

Thus, when the DJIA reversed decisively from 10,000 in September of 2001, the breakdown in Western confidence manifested as the literal collapse of a key symbol of Western financial prowess and American global economic hegemony....the World Trade Center towers in New York City. Likewise, a blow occurred against the Pentagon in Washington DC, the symbol of American global military hegemony.

There are other major examples of significant negative historical events erupting in conjunction with reversals from key thousand marks in the DJIA.

Right after the DJIA failed at Dow 8000 in late-October of 1997, a mini-crash occurred in association with a financial panic in Asia.

Finally, between 1966 and 1982, the DJIA reversed from the "Magic 1000" barrier several times. After each reversal, all kinds of troubles emerged ranging from OPEC oil embargoes, to the Vietnam War, to Watergate. One of the most notable cases occurred in October of 1973 when the DJIA rose to just below Dow 1000 as the Arabs launched a surprise attack against Israel which, in turn, led to a major East/West confrontation and an Arab oil embargo against the West. Consequently, the world economy entered a severe contraction and stock prices plunged in the largest market correction up to that time since the Great Depression.

Given the historical pattern of major stock market reversals from key thousand marks in the DJIA, there is reason to believe that a reversal from Dow 12,000 might be associated with a major decline in stock prices possibly exacerbated by some sort of historical "shock(s)" like occurred with such breaks in the past.

Please note that a potential reversal from Dow 12,000 is coinciding with reversals from key thousand marks in major European stock indices. The UK FTSE 100, French CAC 40 and German DAX recently reached the 6000, 5000 and 7000 marks, respectively, from which they have turned down.

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- HINDENBURG OMEN -

On top of the DJIA reversing below the psychologically important 12,000 mark following a Dow Theory bear market signal, another reason to suspect a stock market crash to soon occur is that there has been a confirmed "Hindenburg Omen" in recent days as occurred before the July/August break in stock prices last summer that marked the beginning of the current financial crisis:

The Hindenburg Omen is a technical analysis signal that attempts to predict a forthcoming stock market crash . It is named after the Hindenburg disaster , the crash of the German zeppelin of the same name in May 1937. The Hindenburg Omen is the alignment of several technical factors that measure the underlying condition of the stock market - specifically the NYSE - such that the probability that a stock market crash occurs is higher than normal, and the probability of a severe decline is quite high. The rationale behind the indicator is that, under normal conditions, either a substantial number of stocks establish new annual highs or a large number set new lows - but not both. When both new highs and new lows are large, it indicates the stock market is undergoing a period of extreme divergence. Such divergence is not usually conducive to future rising prices. A healthy market requires some degree of internal uniformity, whether the direction of that uniformity is up or down. (Source: Wikipedia)

As explained by Robert McHugh in an article for Safe Haven, the record of the Hindenburg Omen in predicting major stock market drops is impressive:

If we define a crash as a 15% decline, of the 22 confirmed Hindenburg Omen signals, six (27.2 percent ) were followed by financial system threatening, life-as-we-know-it threatening stock market crashes. Three (13.6 percent) more were followed by stock market selling panics (10% to 14.9% declines). Three more (13.6 percent) resulted in sharp declines (8% to 9.9% drops). Five (22.7 percent) were followed by meaningful declines (5% to 7.9%), three (13.6 percent) saw mild declines (2.0%to 4.9%), and two were failures, with subsequent declines of 2.0% or less. Put another way, there is a greater than 25 percent probability that a stock market crash - the big one - will occur after we get a confirmed (more than one in a cluster) Hindenburg Omen. There is a 41 percent probability that at least a panic or crash sell-off will occur. There is a 54.5 percent probability that a sharp decline greater than 8.0 % will occur, and there is a 77.2 percent probability that a stock market decline of at least 5 percent will occur. Only one out of roughly 7.5 times will this signal fail .

Below is a table breaking down the record of this signal in predicting stock market declines:

Date of first Hindenburg Omen Signal	# of Signals In Cluster	DJIA Subsequent % Decline	Time Until Decline Bottomed
9/21/2005	5	?	?
4/13/2004 (1)	5	5.4%	30 days
6/20/2002	5	15.8%	30 days
		23.9%	112 days
6/20/2001	2	25.5%	93 days
3/12/2001	4	11.4%	11 days
9/15/2000	9	12.4%	33 days
7/26/2000	3	9.0%	83 days
1/24/2000	6	34.2%	44 days
6/15/1999	2	6.7%	122 days
12/22/1998 (2)	2	0.2%	1 day
7/21/1998 (3)	1	19.7%	41 days
12/11/1997	11	5.8%	32 days
6/12/1996	3	8.8%	34 days
10/09/1995	6	1.7%	1 day
9/19/1994	7	8.2%	65 days
1/25/1994	14	9.6%	69 days
11/03/1993	3	2.1%	2 days
12/02/1991	9	3.5%	7 days
6/27/1990	17	16.3%	91 days
11/01/1989	36	5.0%	91 days
10/11/1989	2	10.0%	5 days
9/14/1987	5	38.2%	36 days
7/14/1986	9	3.6%	21 days

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- THE AUGUST 1ST TOTAL SOLAR ECLIPSE -

"...a full moon in general and a lunar (eclipse) full moon close to solar eclipses, in particular, seem to be the triggering device that allows for the rapid transformation of investor psychology from manic greed to paranoia. " - Peter Eliades' online "Current Observations"

Strangely enough, one reason to expect a major mass panic in the near-future is an upcoming solar eclipse.

There is a risk of a major panic in the days ahead based upon the work of Steven Puetz concerning eclipses.

Steve Puetz discovered that almost all of the largest stock market crashes in history have occurred around the time of a full moon before or after a solar eclipse, particularly when that full moon is a lunar eclipse .

Consider the following excerpt from Peter Eliades online "Current Observations":

We seldom use much newsletter space for the ideas of others, but the theories we are about to present fit together so well, we believe you will find them as interesting as we do. The two researchers are Steve Puetz (pronounced "pits") and Chris Carolan. Chris just won the 1998 Charles H. Dow Award for his original research and the complete article is offered on his website at http://www.calendarresearch.com/ . The research by Puetz was first noted in our October 10, 1995 newsletter. Here is what we wrote: "Puetz attempted to discover if eclipses and market crashes were somehow connected. Without discussing our own opinion on the potential connection between astronomical configurations and market timing, let's simply relate to you the basic findings discussed by Puetz. He emphasized that he is not contending that full moons close to solar eclipses cause market crashes. But he does conclude that a full moon in general and a lunar (eclipse) full moon close to solar eclipses, in particular, seem to be the triggering device that allows for the rapid transformation of investor psychology from manic greed to paranoia. He asks what the odds are that eight of the greatest market crashes in history would accidentally fall within a time period of six days before to three days after a full moon that occurred within six weeks of a solar eclipse? His answer is that for all eight crashes to accidentally fall within the required intervals would be .23 raised to the eighth power less than one chance in 127,000." ". . .Puetz) used eight previous crashes in various markets from the Holland Tulip Mania in 1637 through the Tokyo crash in 1990. He noted that market crashes tend to be lumped near the full moons that are also lunar eclipses. In fact, he states, the greatest number of crashes start after the first full moon after a solar eclipse when that full moon is also a lunar eclipse . . Once the panic starts, Puetz notes, it generally lasts from two to four weeks. The tendency has been for the markets to peak a few days ahead of the full moon, move flat to slightly lower --waiting for the full moon to pass. Then on the day of the full moon or slightly after, the brunt of the crash hits the marketplace."

A total solar eclipse will take place on August 1st that will be followed by a lunar eclipse on August 16th. Puetz highlights the likely crash window as being from six days before to three days after a full moon that occurs within six weeks before or after a solar eclipse, particularly if this full moon is a lunar eclipse. Tomorrow's full moon (6/18) falls six weeks before the August 1st solar eclipse which means that a stock market crash window opened late last week that should close by the end of this week. Are we about to enter a panic of some sort here?:

It's possible, but one should note, according to Puetz observation, the greater likelihood for a crash will be around the full moon/lunar eclipse on August 16th that follows the solar eclipse.

While the idea that the moon influences mass mood might seem like lunacy, it is nonetheless true. Consider, for instance, a University of Michigan Business School study by Ilia Dichev and Troy Janes. This study examined 100 years of the stock market trends as they relate to the lunar phases. According to it, “Returns in the 15 days around New Moon dates are about double the returns in the 15 days around full moon dates. This pattern of returns is pervasive: We find it for all major U.S stock indexes over the past 100 years and for nearly all major stock indexes of 24 other countries over the last 30 years.”

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Since we are entering a possible worldwide panic and global collapse of stock markets, the question is why? If, indeed, a new large-scale decline in U.S. stock prices is getting underway, particularly one of Grand Supercycle- or even Millenial Cycle-scale, then what sort of events might cause an upset of investors' expectations and cause Western Civilization to collapse?

Most are currently focused on the unraveling of the massive debt bubble that has been caused by the reckless greed of consumers, investors and banks that was unchecked because of irresponsible, if not outright fraudulent, government and Federal Reserve policies in recent years and decades. The stock market, driven to an utterly irrational extreme of optimism by unrelenting greed fed by hedge funds and an ocean of financial derivatives, which Warren Buffet has labelled "financial weapons of mass destruction", will crash as it reflects a debt-deflation implosion in the economy that astute thinkers like Robert Prechter have been warning about for years. (Also see the recently updated Pictures of a Stock Market Mania and the constantly updated Prudent Bear Fund web site. An excellent blog on the emerging economic collapse is Market Ticker, updated daily by Karl Denninger).

Beyond the potential for financial and economic collapse, however, what Prechter and other such long-wave theorists fail to recognize is that the social wave patterns they analyze do not necessarily unfold in a consequential manner, i.e., where a downturn in mood gives rise to the negative thinking and associated actions that beget greater upsets in collective confidence and reinforce given downtrends in collective mood. Rather, such historical wave patterns are synchronistic such that reversals and large-scale downtrends manifest as negative historical events (like 9/11) collectively experienced as mass mood collapses. Accordingly, a reversal below Dow 12,000 at the current juncture may be connected to negative historical shock(s) outside of financial markets and the economy.

In the summer of 1990, after the DJIA reversed from 3,000, Saddam Hussein invaded Kuwait precipitating an oil-shock and a chapter of conflict in the Persian Gulf that continues to this day.

In September 2001, after the DJIA reversed from 10,000, the terrorist attacks of 9/11 occurred triggering the War On Terror that continues to this day.

My immediate concern is that a reversal below Dow 12,000 into the Grand Supercycle crash could manifest as a new chapter of war for America. I continue to believe we are ultimately facing a global nuclear war starting in the Middle East as I foresaw back in February of 1991. It's possible that the world is on the verge of a crisis involving the Middle East and/or NATO might soon end up in a military confrontation with Russia over Kosovo and/or Georgia.